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Connecticut Water Service (CTWS) to Merge With SJW Group
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Connecticut Water Service announced that it has entered into a definite agreement to merge with SJW Group (SJW - Free Report) in an all-stock transaction. The combined company will become one of the largest water and wastewater service providers in the United States and serve more than 1.5 million customers in multiple states. The transaction is expected to be completed by the end of 2018, subject to approval of shareholders and regulatory authorities.
The merger news has been received well by the market and Connecticut Water Service’ shares have gained 9.7% in a day’s trade.
Details of the Deal
Per the agreement, each shareholder of Connecticut Water Service will receive 1.1375 shares of SJW Group common stock. The entire transaction’s value will be $750 million, considering SJW Group’s share price at the end of Mar 14, 2018. Connecticut Water shareholders are getting a premium of 18% based on its closing price at the end of Mar 14, 2018.
Post closure of the transaction, SJW Group’s and Connecticut Water Service’ shareholders will retain 60% and 40% ownership of the combined company, respectively.
The Board of Directors of the combined company will consist of 12 directors, with seven appointed by the SJW Group and five, including the Lead Independent Director, appointed by Connecticut Water.
Benefits of the Merger
This merger is expected to be immediately accretive to earnings of the combined company and allow management to increase shareholders’ value through share buyback and repurchase of shares.
In addition, the financial flexibility of the combined company will allow it to carry on with infrastructure upgrades, replacement of old mains and pipelines, and provide high-quality services to its customers.
Bigger Picture
Consolidation is the need of the hour in the fragmented U.S. water utility space. The water utility infrastructure in the United States is getting old and needs ample investments, which are easier for bigger players to make. Consolidation would therefore drive the necessary infrastructure overhauls that have become imperative for the industry at large.
American Water Works Company (AWK - Free Report) is very active and keeps on making strategic acquisitions to expand its footprints. The company added nearly 42,000 customers in 2016 through closed acquisitions and followed up with 39,514 customer additions in 2017 via acquisitions. The company is already in discussions to acquire another 23,000 customers through acquisitions.
Investigation of the Merger
The merger of Connecticut Water Service and SJW Group might not be a smooth one, as Rigrodsky & Long, P.A. announced that it is investigating potential legal claims regarding possible breaches of fiduciary duties by the board of directors of Connecticut Water Service and other violations of law related to the Company’s entry into an agreement to merge.
American States Water Company’s long-term earnings growth is currently pegged at 5%. Its 2018 earnings estimates moved up 0.6% in the last 30 days to $1.79.
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Connecticut Water Service (CTWS) to Merge With SJW Group
Connecticut Water Service announced that it has entered into a definite agreement to merge with SJW Group (SJW - Free Report) in an all-stock transaction. The combined company will become one of the largest water and wastewater service providers in the United States and serve more than 1.5 million customers in multiple states. The transaction is expected to be completed by the end of 2018, subject to approval of shareholders and regulatory authorities.
The merger news has been received well by the market and Connecticut Water Service’ shares have gained 9.7% in a day’s trade.
Details of the Deal
Per the agreement, each shareholder of Connecticut Water Service will receive 1.1375 shares of SJW Group common stock. The entire transaction’s value will be $750 million, considering SJW Group’s share price at the end of Mar 14, 2018. Connecticut Water shareholders are getting a premium of 18% based on its closing price at the end of Mar 14, 2018.
Post closure of the transaction, SJW Group’s and Connecticut Water Service’ shareholders will retain 60% and 40% ownership of the combined company, respectively.
The Board of Directors of the combined company will consist of 12 directors, with seven appointed by the SJW Group and five, including the Lead Independent Director, appointed by Connecticut Water.
Benefits of the Merger
This merger is expected to be immediately accretive to earnings of the combined company and allow management to increase shareholders’ value through share buyback and repurchase of shares.
In addition, the financial flexibility of the combined company will allow it to carry on with infrastructure upgrades, replacement of old mains and pipelines, and provide high-quality services to its customers.
Bigger Picture
Consolidation is the need of the hour in the fragmented U.S. water utility space. The water utility infrastructure in the United States is getting old and needs ample investments, which are easier for bigger players to make. Consolidation would therefore drive the necessary infrastructure overhauls that have become imperative for the industry at large.
American Water Works Company (AWK - Free Report) is very active and keeps on making strategic acquisitions to expand its footprints. The company added nearly 42,000 customers in 2016 through closed acquisitions and followed up with 39,514 customer additions in 2017 via acquisitions. The company is already in discussions to acquire another 23,000 customers through acquisitions.
Investigation of the Merger
The merger of Connecticut Water Service and SJW Group might not be a smooth one, as Rigrodsky & Long, P.A. announced that it is investigating potential legal claims regarding possible breaches of fiduciary duties by the board of directors of Connecticut Water Service and other violations of law related to the Company’s entry into an agreement to merge.
Zacks Rank & A Key Pick
Connecticut Water Service has a Zacks Rank #3 (Hold). A better-ranked stock from the same industry worth considering is American States Water Company (AWR - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
American States Water Company’s long-term earnings growth is currently pegged at 5%. Its 2018 earnings estimates moved up 0.6% in the last 30 days to $1.79.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>